Fresh & Easy raises white flag

Sitting here in a Starbucks coffee shop (nonfat latte, venti) , I'm plugging in one more blog post for the week even though this is technically a vacation day.

I enjoyed visiting with various retail analysts yesterday about the failing fortunes of Fresh & Easy in the U.S. Look for expanded coverage on that topic today on The Packer's news page.

While some may see Tesco's white flag on the Fresh & Easy experiment as a "told you so" moment to throw back at the arrogant Brits, one observer told me that he was sorry the Fresh & Easy chain didn't take hold. The U.S. could use a broader base of buyers.

“Innovation is the bleeding edge,” said Don Goodwin, president of Golden Sun Marketing, Minnetrista, Minn. “They tried to be innovative and they bled profusely.”

The chain never nailed demographics and site selections for their stores, either.

For example, Bruce Peterson noted that the chain’s assortments appeared to be much the same but the neighborhoods they operated in were quite different. Interestingly, Peterson said the Fresh & Easy struggles in that regard reminded him of the experience of Food Lion in the 1980s.

Despite a tremendous investment in research by Tesco to find out the U.S. shopper wanted, the Fresh & Easy stores never hit the mark, said Bill Bishop, chairman of Willard Bishop LLC, Barrington, Ill.

“From the first time I went into the stores, they were very dull and whatever their value proposition was not clear,” he said. Bishop said Fresh & Easy never bridged the huge cultural gap between U.K. and U.S. retailing.

As opposed to beautiful wet rack and a stunning leaf lettuce display, prepackaged produce didn’t have the “fresh” appeal implied in the Fresh & Easy image, said Ed Odron, owner of Stockton, Calif.-based Ed Odron Produce Marketing Consulting. “In California the expectations were different than people saw when they walked in the store.”

TK: If Tesco is shopping the the Fresh & Easy stores, who will be in the market? Check out what our retail analysts think who might make sense for the stores when the expanded coverage is put online later today.

It is interesting to look back The Packer's initial coverage of Tesco's plan, published in December 2006. Here are excerpts from that story:

Tesco, the United Kingdom's largest retailer and the fourth-largest in the world behind Wal-Mart and Home Depot in the U.S., and France's Carrefour, said it is going through with its plans to invest $2 billion in opening as many as 300 small grocery stores in Southern California, Las Vegas and Phoenix, according to a Los Angeles Times story.

Tesco first announced in September it would develop U.S. business through "organic growth" backed by a capital investment of $493.8 million per year, funded from existing resources.

The company originally said that, after conducting extensive consumer research, it would model the U.S. stores after its successful Express concept, 3,000-square-foot markets that sell 7,000 items, including fresh produce and wines, as well as an in-store bakery. In the Times story, however, Tesco USA chief executive officer, Tim Mason, said the company was looking for sites closer to 15,000 square feet, which would make them more comparable to an average Monrovia, Calif.-based Trader Joe's.

Mason said company management was negotiating for the sites, with the first store due to open in the second half of 2007.

As part of its strategy of self-sufficiency in having a network of stores and distribution

Mason said in the Los Angeles Times story that the stores will emphasize a speedy, efficient distribution system. He said the stores would be "smaller, simpler grocery stores" where shoppers could find what they need in a hurry, eliminating the need to make several trips to various stores.

"One of the problems of distribution in a place as vast as America is that most of the freshness is used up in trucks rather than in people's refrigerators," he said in the story.

"There's no question that convenience and freshness are the two driving forces for the consumer today," Degen said. "Everybody they will be going up against, whether it be Trader Joe's, Costco or even 7-Eleven, they will be competing on convenience. But the quality of the food is going to have to be high because they're also going to be competing for dollars Americans spend at restaurants and other foodservice outlets."

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About the Author:

Tom Karst

Tom Karst is national editor for The Packer and Farm Journal Media, covering issues of importance to the produce industry including immigration, farm policy and food safety.
He began his career with The Packer in 1984 as one of the founding editors of ProNet, a pioneering electronic news service for the produce industry. Tom has also served as markets editor for The Packer and editor of Global Produce magazine, among other positions.
Tom is also the main author of Fresh Talk, www.tinyurl.com/freshtalkblog, an industry blog that has been active since November 2006.
Previous to coming to The Packer, Tom worked from 1982 to 1984 at Harris Electronic News, a farm videotext service based in Hutchinson, Kansas.
Tom has a bachelor’s degree in agricultural journalism from Kansas State University, Manhattan.
He can be reached at tkarst@farmjournal.com and 913-438-0769. Find Tom's Twitter account at www.twitter.com/tckarst.